Question
A tenant occupying 20,000 square feet in your building has two years remaining on their lease. You have a good relationship with this tenant and
A tenant occupying 20,000 square feet in your building has two years remaining on their lease. You have a good relationship with this tenant and you assess the probability that they will renew their lease at 75%. If your tenant renews the lease, they will pay $15/sf in rent. If the tenant vacates, you expect that a new tenant will pay $18/sf. The gross rental income you expect to receive for this space in the year after the lease expires is $315,000. If you expect it to take 9 months to find a new tenant for the space if your existing tenant does not renew their lease, what is the expected vacancy adjustment in year 3?
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